U.S. stock futures fluctuate on political uncertainties in Italy

McDonald’s Sales

McDonald’s added 1.9 percent to $90.18. Analysts projected a gain of 0.2 percent for sales at stores open at least 13 months, the average of 14 estimates compiled by Consensus Metrix. Sales in the U.S. increased 2.5 percent, the Oak Brook, Illinois-based company said today in a statement. Analysts anticipated a drop of 0.6 percent.

Ingersoll-Rand Plc jumped 2.3 percent to $49.80. The company investor Nelson Peltz proposed breaking up plans to spin off its commercial and residential security businesses within the next year.

Companies in the S&P 500 are paying less in interest on debt than any time in at least a decade, leaving investors more dependent on economic growth and corporate spending for equity gains in 2013.

Constituents of the benchmark gauge for American stocks such as Exxon Mobil Corp. and Walt Disney Co. cut interest expenses to 2.39 percent of sales in the 12 months ended Sept. 30 on average, the lowest level since at least 2002, according to data compiled by Bloomberg and Strategas Research Partners. With borrowing expenses at record lows, executives are finding it harder to squeeze costs, causing profit margins to contract for the first time since 2009.

Bulls vs Bears

Bears say projected revenue growth of 3.8 percent for S&P 500 companies next year won’t be enough to drive higher profits without a decline in expenses. Bulls point to 8.9 percent profit growth estimated for next year, equity valuations at a 12 percent discount to the six-decade average and an economic recovery as reasons chief executive officers will start to spend the $1 trillion in cash they’ve built up since the recession.

“The consensus view is there’s not much more room for margin expansion,” Nick Sargen, who oversees $43 billion as chief investment officer at Fort Washington Investment Advisors in Cincinnati, said in a phone interview. “If we’ve plateaued on profit margins, then the case has to be that profit growth going forward is more a function of the overall growth rate of the U.S. and global economy.”

Bloomberg News

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